Wednesday, October 29, 2008

At the Federal Level It's About Medical Costs

Today's NY Times has an article about both candidates fiscal plans. The bottom line isn't pretty:

While both presidential candidates enter the campaign’s final week promising to be the better fiscal steward, each has outlined tax and spending proposals that would make annual budget deficits worse, analysts say, with Senator John McCain likely to create a deeper hole than Senator Barack Obama would.

This article is based on an analysis by the Tax Policy Center which concluded:

Both John McCain and Barack Obama have proposed tax plans that would substantially increase the national debt over the next ten years, according to a newly updated analysis by the non-partisan Tax Policy Center. Compared to current law, TPC estimates the Obama plan would cut taxes by $2.9 trillion from 2009-2018. McCain would reduce taxes by nearly $4.2 trillion. Obama would give larger tax cuts to low- and moderate-income households and pay some of the cost by raising taxes on high-income taxpayers. In contrast, McCain would cut taxes across the board and give the biggest cuts to the highest-income households.

This is a very difficult time for fiscal conservatives like myself. Over the last 8 years the Federal Government has been run by idiots who have spent a ton of money and issued mammoth amounts of debt to pay for it. Now we are faced with a true economic crisis of global proportions. The ability to issue mammoth amounts of debt without negative implications would be great. Instead we are left with a country already heavily in debt thereby making the payments for fiscal stimulus an economically iffy proposition. The bottom line is the US is going to engage in a big flurry of deficit spending over the next few years, thereby increasing the total amount of debt outstanding.

That means on the back-end we have figure out a way to pay for all of this debt we're going to issue. And a central issue there is medical costs:

But for the long run, they say, the president’s fiscal record will hinge on whether he can achieve the health care cost savings each promises, which in turn will help control the fast-rising expenses for Medicare and Medicaid. Neither candidate has a comprehensive proposal to address unsustainable growth in those programs.

According to the CBO spending for Medicare was $237.9 billion in 2001 and $436 billion in 2007. That's an increase of 83% in 7 years. Over the same period Medicaid spending increased from $129.4 billion to $196 billion or an increase of 51.45%. Total spending on these two programs has increased from 19.71% of federal spending in 2001 to 23.15% in 2007.